Please see below article received from Brooks Macdonald this morning, which provides a global market update for your perusal.
What has happened?
Markets delivered a robust performance over the past 24 hours, fuelled by soft US labour data that bolstered expectations for a Federal Reserve rate cut this month. Weaker labour market signals, including a disappointing ADP private payrolls report of +54k (vs. +68k expected) and initial jobless claims hitting a 10-week high of 237k (vs. 230k expected), underscored concerns following last month’s unexpectedly poor jobs report. The August ISM Services Index rose to 52.0 (from 50.1 in July). Prices paid component dipped slightly from 69.9 to 69.2, signalling persistent cost pressures. This backdrop drove a bond rally, with the 2y Treasury yield dropping to an 11-month low and the 10-year yield falling to a 5-month low. The S&P 500 gained +0.83% and the Magnificent 7 gained +1.31% hitting record highs, led by Amazon’s +4.29% surge after news of its AI-powered workspace software testing.
Fed independence under scrutiny
The Federal Reserve’s independence took centre stage yesterday during Stephen Miran’s Senate confirmation hearing for the Fed’s Board of Governors. Miran emphasised, ‘If confirmed, I will act independently, as the Federal Reserve always does.’ Questioned about retaining his CEA Chair role while serving as Governor until January, he clarified he would resign from the CEA if nominated for a longer-term Fed position. Meanwhile, news of a US Justice Department investigation into Fed Governor Lisa Cook for alleged mortgage fraud added uncertainty, as markets await updates on her bid for a court order to block potential dismissal.
Europe steadies ahead of French confidence vote
Across the Atlantic, French markets steadied as fears over Monday’s National Assembly confidence vote subsided. With a defeat widely expected, investor concerns about prolonged instability eased. French OATs outperformed, with the 10-year yield dropping 5.0bps to 3.49%, narrowing the Franco-German spread to 77bps, a recent low. The STOXX 600 rose +0.61%, reflecting cautious optimism in European markets.
What does Brooks Macdonald think?
As markets ride the wave of Fed rate cut optimism, today’s US Payrolls report marks the start of a pivotal two-week period that could shape global markets for the rest of 2025. Expectations are for August nonfarm payrolls to slightly outperform July’s figures, with the unemployment rate holding at 4.2%. However, revisions to prior months’ data will be crucial after last month’s significant downward adjustments (+19k for May, +14k for June), the largest in over five years, which led to the ousting of BLS chief Erika McEntarfer. The presumptive nominee, E.J. Antoni, awaits Senate confirmation this month. With US CPI next Thursday and the FOMC decision the following Wednesday, the labour market’s trajectory and inflation data will be pivotal in guiding the Fed’s next moves.
Please check in again with us soon for further relevant content and market news.
Chloe
05/09/2025